Jinhui Shipping and Transportation : Corporate Governance Report 2023

Jinhui Shipping and Transportation Company Limited

Corporate Governance Report 2023

(Extracted from Annual Report 2023)

Jinhui Shipping recognizes the importance of good corporate governance to the Company's value creation and has devoted considerable efforts to identify and formulate corporate governance practices appropriate to the Company in terms of practicality and suitability. The Board has the overall responsibility for the Company's corporate governance and ensures the Company implements sound corporate governance practice.

SECTION 3-3B OF THE NORWEGIAN ACCOUNTING ACT

The following specifies the items or information that must be disclosed under Section 3-3b of the Norwegian Accounting Act:

1. A statement of the code of practice and regulatory framework for corporate governance

Pursuant to Section 4.4 of the Oslo Rule Book II - Issuer Rules, companies listed on the Oslo Stock Exchange (Oslo Børs) must publish a comprehensive report on the company's corporate governance in the directors' report or in a document that is referred to in the directors' report. The report must cover every section of the Norwegian Code of Practice for Corporate Governance

(the "Norwegian Code of Practice") and must include the required report contents as set out in Section 3-3b of the Norwegian Accounting Act.

Jinhui Shipping has applied the principles as set out in the Norwegian Code of Practice as its corporate governance structure. The Company gives an annual review of the corporate governance report which covers every section for its compliance with the Norwegian Code of Practice, and explains the deviations with selected alternative approaches on pages 15 to 31 with the numbers refer to the section's numerical order of the Norwegian Code of Practice.

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Jinhui Shipping and Transportation Company Limited

Corporate Governance Report 2023

(Extracted from Annual Report 2023)

1. Information on where the code of practice and regulatory framework is publicly available
   The Norwegian Code of Practice, which was revised and published on 14 October 2021 is available on the Norwegian Corporate Governance Board website (www.nues.no) and the Oslo Rule Book II - Issuer Rules is available on Oslo Børs Euronext website (www.euronext.com/en/markets/oslo).
   Jinhui Shipping adhered to the Norwegian Code of Practice throughout the year except for certain deviations. We report our conformance and provide explanation of the reasons for the deviations and what solution we have selected in below fifteen separate sections as described in the Norwegian Code of Practice.
2. Description of the main elements of the Group's internal control and risk management systems associated with the financial reporting process
   The Board is responsible for ensuring financial reporting process is subject to adequate control and has laid down instructions and guidelines on its own works as well as for the executive personnel on day-to-day operations and ongoing financial monitoring. The Board carries out a review of the Group's most significant risk areas in every six months and performs an annual review of its internal control systems. The Audit Committee assists the Board relating to the efficiencies of the Group's internal control over the financial reporting process; the effectiveness of the Group's risk management policies; and the qualifications and independence of the external auditor.
   The Group adopts a uniform generally accepted accounting practice in the preparation of financial statements of the Company and its subsidiaries. The internal control systems identified in the financial reporting process are primarily designed to mitigate the risks including financial reporting risk, compliance-related risk, fraud risk, and risk on financial-accounting-related IT systems. The control procedures mainly include authorizations, segregation of duties, reconciliations, management review and IT controls over financial- accounting-related IT systems. To ensure adequate and effective internal control on financial reporting process is adopted and implemented, key control procedures are ongoing monitored by the executive personnel, regularly assessed by the Board and the Audit Committee and annually reviewed by the external professionals.

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Jinhui Shipping and Transportation Company Limited

Corporate Governance Report 2023

(Extracted from Annual Report 2023)

1. Provision in the Company's Memorandum of Association governing general meetings
   The Company's Memorandum of Association and Bye-Laws laid down the shareholders' right proceedings at general meetings, voting rights, proxies, transfer of shares, and also the rules governing the alteration or amendment to bye-laws and memorandum of association. Both do not extend or depart from the general rules laid down in Chapter 5 of the Norwegian Public Limited Liability Companies Act, which governs general meetings. The Company's Memorandum of Association and Bye-Laws have been publicly disclosed in the website of the Company.
2. Composition of the Board and the main elements in the prevailing board instructions and guidelines
   The Board adopted the Company's Bye-Laws 36 to 52 as its prevailing board instructions of procedures which laid down general powers, proceedings and administrative procedures of the directors of the Company.
   The Board Committees, which include the Audit Committee and the Remuneration Committee, are appointed by the Board under respective terms of reference that specified their authorities, duties, reporting responsibilities and reporting procedures. The respective terms of reference of the Audit Committee and the Remuneration Committee have been publicly disclosed in the website of the Company. The composition of the Board and the board committee functions are further discussed below in Section 8 and Section 9 under the Norwegian Code of Practice.

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Jinhui Shipping and Transportation Company Limited

Corporate Governance Report 2023

(Extracted from Annual Report 2023)

1. Provision in the Company's Bye-Laws that regulates the appointment and replacement of members of the Board
   Pursuant to the Company's Bye-Law 36, the Directors shall be elected or appointed in the first place at the statutory meeting of members and thereafter in accordance with Bye-Law 38 and shall hold office until the next appointment of Directors or until their successors are elected or appointed.
   Bye-Law 38 stipulates that notwithstanding any other provisions in the Company's Bye-Laws, at each annual general meeting one-third of the Directors for the time being (or, if their number is not a multiple of three, the number nearest to but not greater than one-third) shall retire from office by rotation provided that notwithstanding anything herein, the Chairman and / or the Managing Director shall not, whilst holding such office, be subject to retirement by rotation or be taken into account in determining the number of Directors to retire in each year.
   There are also provisions in Bye-Law 40 and Bye-Law 41 in relation to the removal of Directors and the disqualification of Directors.
2. Mandate that gives the Board the right to issue new shares and provision in the Company's Bye-Laws that gives the Board the right to decide on share repurchases
   There is an existing general mandate in place that gives the Board the power to issue, allot and dispose of shares of the Company not exceeding the aggregate of 30% of the issued share capital of the Company on the date of the resolution. This general mandate was granted to the Board in the Company's annual general meeting held on 24 May 2023 and is valid until the earlier of the date of the next annual general meeting or otherwise revoked or determined by shareholders at a general meeting of the Company. The provision in the Company's Bye-Law 2 giving the Board the right to issue new shares.
   The provision in the Company's Bye-Law 3 giving the Board the right to purchase its shares as the Board shall think fit. In view of the increasingly volatile nature of today's financial markets, the Board shall make timely decision on the purchase of its shares according to the then prevailing market conditions to generate the most value for shareholders of the Company.

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Jinhui Shipping and Transportation Company Limited

Corporate Governance Report 2023

(Extracted from Annual Report 2023)

NORWEGIAN CODE OF PRACTICE FOR CORPORATE GOVERNANCE

The section numbers mentioned below refer to the fifteen sections under the Norwegian Code of Practice.

Section 1 Implementation and reporting on corporate governance

Jinhui Shipping has applied and followed the principles as set out in the Norwegian Code of Practice. The corporate governance report of 2023 covered every section of Norwegian Code of Practice with the description of our conformance throughout the year and the explanation of the reasons for the deviations.

Section 2 Business

The objectives of Jinhui Shipping are set out in its Memorandum of Association, which include the businesses of, inter alia:

• acting and performing all the functions of a holding company;
• acting as ship owners, managers, operators and agents; and
• acquiring, owning, selling, chartering, repairing or dealing in ships.

The Group's main objectives, strategies and risk profiles for our businesses are discussed in "Strategies and Business Profile" on pages 5 to 7 and in the section of Risk Management in "Directors' Report" on pages 60 to 62 in JST 2023 Annual Report.

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Jinhui Shipping and Transportation Company Limited

Corporate Governance Report 2023

(Extracted from Annual Report 2023)

The Company has promulgated a set of Company Code, which sets out the corporate standards and practices used by the Group to direct and manage its business affairs. The Company Code also includes corporate social responsibility guidelines and ethical guidelines and is prepared and updated by referencing to the principles set out in the Norwegian Code of Practice and other applicable rules and regulations. In addition to formalizing existing corporate governance principles and practices, the Company Code also serves the purpose of assimilating existing practices with benchmarks prescribed by the Norwegian Code of Practice and ultimately ensuring high transparency and accountability to the Company's shareholders. The directors and employees of Jinhui Shipping are subject to a range of rules laid down by legislation and regulations, as well as the Company Code and rules and ethical values and guidelines described in the staff handbooks. Section 3-3c of the Norwegian Accounting Act is relevant for Norwegian companies and also for third country issuers that have taxable operations in Norway. The Company did not present social responsibility statement as required under Section 3-3c of the Norwegian Accounting Act as the Company is incorporated in Bermuda and does not have any taxable operations in Norway. Nevertheless, we include the Company's principles on material social responsibility matters related to external environment, working environment, and employees' right and equal treatment in the Directors' report. We also commit to conduct our business in a responsible, ethical and lawful manner and complied applicable rules and regulations in our business practices.

Jinhui Shipping shall maximize shareholders' values in a sustainable manner by increasing the Company's equity value and distributing dividends to shareholders and the Board evaluates the objectives, strategies and risk profiles annually.

Section 3 Equity and dividends

Equity

Jinhui Shipping's capital adequacy is kept under constant review in relation to its objectives, strategies and risk profile. As at 31 December 2023, the Group's total equity was US$349,930,000, accounting for 72% of its consolidated total assets. The Board considers the present equity structure to be satisfactory.

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Jinhui Shipping and Transportation Company Limited

Corporate Governance Report 2023

(Extracted from Annual Report 2023)

Dividend policy

The Company may declare and distribute dividends to the shareholders of the Company. Our policy aims to provide stable and consistent dividends with steady growth when supported by our earnings whilst ensuring that sufficient financial resources can be maintained to fund our business growth. In addition, the amount and timing of any dividend distributions in the future will depend, among other things, on our compliance with covenants in our credit facilities, earnings, financial condition, cash position, Bermuda law affecting the dividend distributions, restrictions in our financing agreements and other factors. As dry bulk shipping market is cyclic and volatile, it's particularly challenging to establish a clear and predictable dividend policy. There can be no assurance that a dividend will be proposed or declared in any given year.

The Board has resolved not to recommend the payment of any interim / final dividend for the year. The dividend policy will be regularly assessed by the Board and will depend, among other things, on the Group's financial obligations, leverage, liquidity and capital resources, and the market conditions. During the year, there was no proposal for the Board to be given any mandate to approve the distribution of dividends.

Increase in share capital

At the 2023 Annual General Meeting of the Company, a general mandate had been granted to the directors of the Company to increase not exceeding the aggregate of 30% of the issued share capital of the Company which would be valid until the earlier of the date of the next annual general meeting or otherwise revoked or determined by shareholders at a general meeting of the Company. No shares were being issued under this authorization in 2023.

According to the Norwegian Code of Practice, the mandate granted to the board of directors to increase the company's share capital should be restricted to defined purposes.

In view of the increasingly volatile nature of today's financial markets, the Board believes having a general mandate in place enables the Company to respond swiftly to the then prevailing market conditions should an equity fund raising exercise be determined to be the appropriate funding channel and proposes this general mandate at the forthcoming annual general meeting.

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Jinhui Shipping and Transportation Company Limited

Corporate Governance Report 2023

(Extracted from Annual Report 2023)

Purchase of own shares

The provision in the Company's Bye-Law 3 giving the Board the right to purchase its shares as the Board shall think fit. In view of the increasingly volatile nature of today's financial markets, the Board shall make timely decision on the purchase of its shares according to the then prevailing market conditions to generate the most value for shareholders of the Company.

Section 4 Equal treatment of shareholders

Equal treatment of shareholders

Jinhui Shipping has one class of shares in issue. All shares have equal voting rights. There are provisions in the Company's Bye-Law 4 in relation to shareholder's voting rights.

Share issues

According to the Company's Bye-Law 4.3, the shareholders shall have the first and preferential right to subscribe for and be allotted any shares of the Company proposed to be issued in proportion to the number of shares held by them, unless the Company by special resolution otherwise decides to waive the shareholders' preferential rights in respect of a particular issue of shares or generally for any period not exceeding five years.

In the event of an increase in share capital where the Board resolves to carry out an increase in share capital on the basis of a mandate granted to the Board that waives the pre-emption rights of existing shareholders, the justification will be publicly disclosed in a stock exchange announcement issued in connection with the increase in share capital. No shares were being issued in 2023.

Transactions in its own shares

Jinhui Shipping's shares are liquid. In the event the Company carries out transactions in its own shares, it would only carry out such transactions either through the stock exchange or at prevailing stock exchange prices if carried out in any other way. If there is limited liquidity in the Company's shares, the Company would consider other ways to ensure equal treatment of all shareholders. No transactions in shares were being carried out by the Company in 2023.

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Jinhui Shipping and Transportation Company Limited

Corporate Governance Report 2023

(Extracted from Annual Report 2023)

Section 5 Shares and negotiability

Jinhui Shipping's shares are freely traded in the Oslo Stock Exchange (Oslo Børs). The Company's shares are registered shares with its shareholders register located at Bermuda. Shareholders of the Company may transfer their shares by an instrument of transfer in the usual common form or in such form as decided by the Board.

In general, all shares are freely negotiable. However, the Board may deny the transfer of shares according to the Bye-Law 11 of the Company. The Board has the option to decline to register the transfer of any share if the registration of such transfer would be likely to result in 50% or more of the aggregate issued share capital and the votes of the Company being held or owned directly or indirectly by a person or persons resident for tax purposes in Norway.

The Board considers that it is appropriate to impose such restriction which protects the existing Norwegian shareholders from unexpected tax changes in Norway for the common interest of the Company and the shareholders. This type of restriction is common for Bermuda and other low-tax jurisdiction companies listed on the Oslo Stock Exchange (Oslo Børs).

Section 6 General meetings

Attendance by shareholders

The Company provides detailed procedures and comprehensive information are distributed to shareholders to allow shareholders to form the view on all matters to be considered at the general meeting. Shareholders of the Company are entitled to attend shareholders' meeting in person or by proxy. Electronic meeting is not applicable as it would be contrary to the Bye-Laws of the Company. All shareholders who are registered in the Euronext Securities Oslo, the Norwegian Central Securities Depository, will receive notification of the general meeting. The notice of calling general meeting and the supporting information, including the procedures for representation at the meeting through a proxy, the deadline for registering the intention to attend the general meeting, the information for each resolution to be considered at the general meeting and for each of the candidates nominated for election, are published on the Company's website no later than 21 days prior to the date of the general meeting.

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Jinhui Shipping and Transportation Company Limited

Corporate Governance Report 2023

(Extracted from Annual Report 2023)

As a general rule, decisions which shareholders are entitled to make pursuant to Bermuda law may be made by a simple majority of votes cast at a general meeting. However, the Bye-Laws of the Company provides that any decision to, inter alia, amend Bye-Laws of the Company or alter the share capital of the Company requires the approval of at least two-thirds of votes cast by those members present in person or by proxy at a general meeting.

The annual general meeting approves the annual financial statements, the Directors' report and the Independent Auditor's report and any dividend proposed by the Board. The annual general meeting also approves the remuneration of members of the Board and consider the guideline for the renumeration of the executive personnel of the Company, as well as fix the remuneration of the auditor. The meeting agenda may also include authorization to purchase own shares, increase the share capital, or any other matters listed in the notice of the general meeting. Minutes from annual general meetings will be made available on Company's website immediately after the annual general meeting.

In order to comply with the requirements of the Registration Agreement dated 30 September 1994 between the Company and Nordea Bank, and Bermuda law, all of the shares of the Company registered in the Euronext Securities Oslo are registered on the register of shareholders of the Company in the name of Nordea Bank. Nordea Bank alone will be entitled to attend and vote at general meetings in respect of shares so held. Nordea Bank has agreed that whenever it receives a notice that a shareholders' meeting of the Company is called, it shall dispatch to each beneficial owner of the shares registered in the Euronext Securities Oslo (or its nominee), a copy of the notice. Nordea Bank has also agreed not to attend or vote at any such meeting other than in accordance with proxies from shareholders registered in the Euronext Securities Oslo. In order to vote through Nordea Bank at annual or special general meetings, shareholders must have registered their shareholdings in the Euronext Securities Oslo (usually registration of shares takes 2 business days) and have deposited a valid proxy form at Nordea Bank not less than 48 hours before the time appointed for holding the general meeting.

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